No.

I won’t deny the condo glut right now, in the Twin Cities and nationwide. With a few exceptions, though, I have found in the Twin Cities that condos continue to sell better (although not always well) in the downtown, core cities and even select inner ring suburban locations, whereas outer suburban areas don’t do as well.  

I have surmised for a long time that condo buyers want to be near the action. They generally want something in return for having to park underground, share a hallway, and have people living above, below and next to them. They want to be closer to amenities and conveniences, and often want them within walking distance.

Want proof? A tally of sales figures of all Twin Cities metro area condos from earlier this year yielded some very interesting, but not entirely surprising results. As of early 2006, of all downtown Minneapolis condos that opened for occupancy in 2005 or were scheduled to do so in 2006, over 75% had been sold, meaning they were either under purchase agreement or had already closed. The percentage for the outer ring suburbs? Just over 30%.

That is a big difference. Why is this? Developers control many things about condo projects, including design, timing and marketing. They don’t control what lies beyond their sites, and condo buyers respond by purchasing in locations that offer more in terms of nearby conveniences and amenities – parks, shopping, jobs, grocery stores, especially if these are within walking distance. Demand is greater for downtown condos because of the range of amenities and activity nearby. All other things being equal, condos with nearby urbanity sell better. At least that is what the numbers say.

Conversely, one suburban developer started marketing a condo project last year that touted urban living in the suburbs. The site was isolated along a busy thoroughfare with nothing nearby within walking distance. In other words, it was a decidedly un-urban location. Condo living would not necessarily provide better proximity to area amenities than a single-family home with attached garage and nice yard. The developer hoped the market would pay for luxury condos in that setting. It didn’t. The sales office is now closed. That is just one example of an outer ring suburban market with a lot of unsold inventory.

Some suburban locations do well, however. In the same survey discussed above, the inner ring suburbs had sold 60% of their units. That is probably driven by condos located in newly-developed or redeveloped, high-amenity, walkable locations such as Excelsior and Grand, in St. Louis Park, where condo sales are noticeably stronger than nearby competitive locations that have fewer amenities and conveniences in close proximity.  

Urban and suburban developers need to understand this inherent placemaking lesson, and I encourage them to choose their sites carefully. It is not an absolute rule of condo development, but it is a very compelling trend. We’re all trying to figure out the condo market, and the next year or so will yield mixed results. Long term, however, condos will continue to be popular at some level, especially in high-amenity locations “where the action is” and buyers are willing to trade their own space for that which is outside their door. Just look at the numbers.